Real Assets and Capital Structure

Murillo Campello A · Erasmo Giambona

240 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Corporate Finance and Governance Financial Analysis and Corporate Governance Corporate Insolvency and Governance

Abstract

Abstract We characterize the relation between asset structure and capital structure by exploiting variation in the salability of corporate assets. To establish this link, we distinguish across different assets in firms’ balance sheets (machinery, land, and buildings) and use an instrumental approach that incorporates market conditions for those assets. We also use a natural experiment driving differential increases in the supply of real estate assets across the United States: The Defense Base Closure and Realignment Act of 1990. Consistent with a supply-side view of capital structure, we find that asset redeployability is a main driver of leverage when credit frictions are high.

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References

1977Determinants of corporate borrowing 2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 1984The Capital Structure Puzzle 1995What Do We Know about Capital Structure? Some Evidence from International Data 1988Financing Constraints and Corporate Investment 1995Inside the Black Box: The Credit Channel of Monetary Policy Transmission 1997Financial Intermediation, Loanable Funds, and The Real Sector 2002Market Timing and Capital Structure

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